Auto Industry is Hurting Folks. How Are You Feeling It?

shawnmwalker

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Same Car, Same Accident. EVERY Carrier is Feeling it!

2014 Acura and a 2016 Acura.
Cost of Claim 100% more than the 2014 Acura.


Frequency is up given, cheap gas and distracted drivers

Severity is through the roof because the same fender bender is now 100% more expensive than it was before because the bumper now has 10 sensors in it and a camera. and can park itself.


Industry is hurting. How does that play out in your agency?


It's been a long time but Shawn Michael Walker is Back Baby!
 
I received a flyer today from Liberty Mutual detailing this exact issue.

Didnt copy/paste well, but gets the point across.
Talking Points for Customer Conversations
Q: What is driving higher commercial auto loss costs?
A: The overall increase in miles driven and rising medical costs from accidents are the main factors driving higher loss costs. During the economic downturn, commercial auto losses trended down as a result of lower employment and fewer miles driven. Meanwhile, the economy started to recover. The recovery, as well as low gas prices, resulted in more miles driven, and an increase in new car and truck sales. It also created a higher demand for qualified drivers, and due to the shortage of experienced drivers in the marketplace, the average driver quality went down. In addition, escalating auto repair costs and increasing incidences of distracted driving (multi-tasking, cell phone, texting) all play a role.* This created a “perfect storm” with increased accident frequency and claim costs.
Q: Are these commercial auto loss increases specific to Liberty Mutual Insurance?
A: No, this is an industry-wide challenge and all insurance companies are facing increased loss costs. In fact, Liberty Mutual’s commercial auto results are better than the industry as a whole.
Q: What is the future outlook for commercial auto?
A: Commercial auto is a key line of business for the insurance industry and demand continues to grow as the economy rebounds. The industry is still recovering from inadequate rates coming out of the recession and prior accidents are costing more than previously estimated; this is changing our outlook on the cost of future losses. Insurance companies recognize that commercial auto is a problem area and expect higher loss ratio trends will continue over the next few years.
*NHTSA National Center for Statistics and Analysis – Driver Electronic Device Use in 2015. https://crashstats.nhtsa.dot.gov/Api/Public/ViewPublication/812326
LIBERTY MUTUAL INSURANCE
libertymutualgroup.com/business
This document provides a general description of this program and/or service. See your policy, service contract or program documentation for actual terms and conditions. Insurance underwritten by Liberty Mutual Insurance Co. or its affiliates or subsidiaries.
© 2016 Liberty Mutual Insurance, 175 Berkeley Street, Boston, MA 02116. 11/16
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What you can do to help mitigate commercial auto loss costs
When submitting a risk:
 Verify and provide correct information upfront to ensure risks are priced appropriately. This includes, but is not limited to:
− Correct VIN numbers so we can validate and obtain accurate weight, type, etc.
− Current driver list
− Motor Vehicle Records (MVRs) if available
 Properly classify vehicles and trailers in eCLIQ with the correct class code (see the Vehicle Class Code Guide and eCLIQ Common Misclassifications for more information)
Educate your customers on commercial auto risk control measures and encourage them to:
 Implement a fleet safety program and follow proper fleet maintenance procedures.
 Enforce company policy for use of company vehicles (e.g., limitation on personal use, who can use company vehicles, hours of operation, etc.).
 Regularly check employees’ driving records and take appropriate action if driving records are not acceptable.
 Use telematic devices to monitor employee driving habits and usage of company vehicles.
 Be aware of the risks involved with employees using their personal vehicles on the job.
 Provide Driver Safety Training for their employees.
 
Industry is hurting. How does that play out in your agency?

short term: so far, not much of a noticeable difference. a few carriers have raised rates but that is common.

long term: I'm sure rates will only go up. that's a double bonus for the agent! higher rates = higher commissions. plus more people will shop around.
 
I love these carriers shocked that auto is killing them..

auto has been a loser class for as long as I have been in this industry, which will be 28 years in May.

as soon as the slightest sign of profitability they gut rates.


ONLY way to make money in auto is
A) right statutory limits and NO UM/UIM
and
B) aggressive claims handling.

And have to stay out of the usual suspect areas that are bad and always will be bad: Florida (particularly south FL) , NY, and Michigan because of the PIP laws.
 
In MN have been enjoying flat or slightly lower renewals on both personal and commercial auto.
 
I would just like to say in defense of Florida and South Florida...there is very little in the way of public transportation that actually works and allows for folks to not drive everywhere. You have to own a car or even simple tasks like the grocery store become a colossal PIA.

Back to our regular scheduled program
 
I would just like to say in defense of Florida and South Florida...there is very little in the way of public transportation that actually works and allows for folks to not drive everywhere. You have to own a car or even simple tasks like the grocery store become a colossal PIA.

Back to our regular scheduled program

yes.. but also being a product manager for an auto unit at a carrier for 10 years.. Floridas issues go well beyond that.

1) UM/UIM is a huge issue .. tons of under insured or uninsured drivers (especially concentrated around Broward/ Dade County)

2) horrendous legal environment.. there are more PI attorneys in the state of FL than any other state.

Overall .. it is a horrendous state to stay profitable in .. it is better to just not write there.
 
Pay raise!

But on a serious note I think its the ebb and flow of the market. Sooner or later someone will think they can offer rates lower than everyone. They will disrupt like the 800-insurance and internet companies did and the pattern will start over again.
 
Companies like GEICO and Progressive Direct compete almost entirely on price (or the illusion that they are cheaper than anyone else). When you compete on price and you can't operate any more efficiently than you already are, how do you continue to compete on price? By reducing coverage or "tightening" claims adjusting. If losses are escalating simultaneously, then you have to really reduce coverage and claims payments.

So, increasingly, we find that insurance, specifically auto insurance, is NOT the commodity that consumers are led to believe where the only material difference is price. This turns customers into victims. And not only customers...it victimizes innocent people who are injured or damaged by drivers with inferior coverage.

Regulators have done a terrible job of policy form review. They are allowing too many insurance products in the marketplace that exposure insureds and the people they harm to potentially uncovered catastrophic losses. We have mandatory minimum financial responsibility limits (that are far too low)...is it time to establish minimum coverage requirements?

To see examples of some of the differences, check out this article:

Price Check
 
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